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TMI Blog2024 (11) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... .................. 21 D. ANALYSIS ........................................................................................................... 21 i. The Notional Doctrine of Concurrent Jurisdiction and Applicability of Part I of the Arbitration & Conciliation Act, 1996. ................................................ 24 a. Pre-BALCO Regime.............................................................................................. 26 b. Post BALCO Regime. ........................................................................................... 43 ii. Criterion or Test for Determination of Seat of Arbitration: Conflict of 'Venue' versus 'Seat' of Arbitration. .......................................................................... 56 a. Closest Connection Test - Place of Arbitration to be ascertained by the Law governing the Arbitration Agreement and not the Place of Arbitration..... ................ 56 b. The Shashoua Principle - 'Venue' to be construed as 'Seat' ............................... 71 iii. Whether the Seat of Arbitration in the underlying Distributorship Agreement is in India? ............................................................................ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As per the terms of the aforesaid agreement, the petitioner herein became the authorized distributor of the respondent's products including mobile handsets and was granted a non- exclusive right to market and distribute the same under its own account in the territory of Afghanistan as allotted and delineated under the said agreement. 4. Before proceeding further, it would be apposite to first highlight some of the salient features of the aforesaid Distributorship Agreement which are relevant to the case at hand. Under the terms of the aforesaid Distributorship Agreement, it is stipulated that all payments shall be made by the distributor in full before the physical delivery of the products, and it further specifies that the mode of such payment shall be through a letter of credit (L/C). The Distributorship Agreement further provides that no additions or modifications made to the aforesaid agreement shall be binding unless it is in writing and is duly signed by the authorized representatives of the parties. Additionally, the said Distributorship Agreement defines a 'supplementary agreement' to mean and include any further agreement or agreements that may be executed by the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said Distributorship Agreement also contains an arbitration clause which states that any dispute or difference pertaining to the said agreement or arising therefrom shall be resolved through arbitration alone, the venue of the arbitration shall be Dubai, UAE and that the arbitration shall be subject to the UAE Arbitration & Conciliation rules. The relevant clauses are reproduced hereunder: - "26. DISPUTE RESOLUTION In the event of any dispute or difference arising out of the Agreement, its validity, applicability, then the same shall be referred to the arbitration. The arbitration shall be subject to UAE Arbitration and Conciliation rules made there under. The venue of arbitration shall be Dubai, UAE. 27. LAW AND JURISDICTION This Agreement shall be governed by and construed in accordance with the laws of UAE and shall be subject to the non- exclusive jurisdiction of the Dubai Courts." 6. Pursuant to the aforesaid Distributorship Agreement several transactions took place between the petitioner and the respondents for the purchase and distribution of mobile handsets. It is the case of the petitioner that the business practice mutually followed by the parties for undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the respondent no. 1's account cannot be directly adjusted for the invoices raised by the respondent no. 2. It further stated that, the petitioner company should first make payment to the respondent no. 2 towards the invoices that have been raised, and thereafter, the respondent no. 1 company would remit the outstanding credit balance to the petitioner. The relevant portion of the respondent's email dated 23.10.2012 is reproduced below: - "Dt. 23.10.2012 Subject: Account Statement Dear Sir, Kindly note that from Arif Azim we need to receive USD 109500 for sales made in MMX India and Need to pay USD 190625 in respect of advance received respect of sale to be made in FZE. Both these accounts are of separate Cos. Hence we should first receive payment of MMX India account; then let Micromax FZE pay to Arif. Regards, Anita" 11. On 15.01.2013, the petitioner made the requisite payment of $109,500/- (USD One hundred nine thousand five hundred), which was now payable directly to the respondent no. 2 towards the aforesaid invoices raised by it. Thereafter, it appears from the materials on record, that over a period of time many more transactions took place between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to accordingly appoint an arbitrator either from the above suggested panel or any other suitable name within 28-days from receipt of the said notice. 16. It is material to note that in the aforesaid notice of invocation dated 14.09.2022, the petitioner further alluded that in the Distributorship Agreement more particularly Clause 27 the parties had not designated a specific court to the exclusion of all other courts to adjudicate the dispute, thus no exclusive jurisdiction had been conferred by the parties upon any particular court. It further stated that, as the cause of action had concurrently both in Afghanistan and India, the petitioner expressed its preference to resolve the dispute through arbitration administered under the jurisdiction of the courts in India. 17. Since no reply to the aforesaid notice of invocation of arbitration was elicited from either of the respondents, the present petition came to be filed by the petitioner on 19.04.2023 before this Court for seeking appointment of an arbitrator under Section 11(6) of the Act, 1996 in other words due to the failure on part of the respondents in nominating an arbitrator as per the mutually agreed upon terms and proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bai, will not dictate what the governing or controlling law would be when the 2nd part of clause 27 reiterates the parties' autonomy in deciding/choosing the seat by expressly stating its intention that "This agreement shall be subject to the non-exclusive jurisdiction of the Dubai Courts". Regard being to other clauses in the agreement, this clause has been incorporated to avoid conflicts related to the jurisdictions of courts and confer jurisdiction on other courts too, it is submitted. (Emphasis supplied). 5. At the outset, be it kindly noted that, the relied upon decision by the respondent to oust the jurisdiction of Indian courts in Mankatsu Impex Private Limited vs Airvisual Limited 2010 (5) SCC 399 is misplaced as it was a case of exclusive jurisdiction in terms conferred by the agreement. A clause therein like Cl.17.2 which provides "the place of arbitration shall be Hong Kong", in addition to, also providing that "all disputes arising out of the MoU shall be referred to and finally resolved and administered in Hong Kong"...is conspicuously absent in the subject agreement. Still on a matter of law, emphasising the Party's autonomy, Mankatsu Impex held; Quote "20. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion; law and jurisdiction. Quote.." Cl. 26. Dispute Resolution In the event of any dispute or difference arising out of the agreement, its validity, applicability, then the same shall be referred to arbitration. The arbitration shall be subject to UAE Arbitration and conciliation rules made there under. The venue of arbitration shall be Dubai, UAE. Cl. 27. Law and jurisdiction This shall be governed by and construed in accordance with the laws of UAE and shall be subject to the non-exclusive jurisdiction of the Dubai Courts." ....Unquote 8. Petitioner submits that Clause 27 preserved the party's autonomy in allowing the concerned parties to choose their seat/jurisdiction. The second part of jurisdictional Cl. 27 discloses the intention - an agreement by itself- to opt out of Dubai court's jurisdiction and this is what the parties had intended by their reference to "the non-exclusive jurisdiction of the Dubai Courts. Since the parties had agreed not to confer exclusive jurisdiction to courts in Dubai, neither of the parties to the agreement construed the arbitration clause as designating courts in Dubai as the seat of arbitration. Vide PASL vs GE 2021 SCC online 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri- partite agreement where a non-signatory to the original agreement directed the petitioner to make a direct payment of $109500 to India by changing the original invoice raised by a party to the agreement. Submission is, 2nd part of Cl.27 envisages a jurisdictional situation as had happened subsequently by the conduct of parties. 12.1 A jurisdiction clause is suggestive of control. In the context of this particular case, the Dubai Courts would have no real control or supervisory jurisdiction over the arbitral process, in as much as, this supplementary agreement further reiterates the party's autonomy of choosing the juridical seat of Arbitration in consonance with 2nd part of Cl.27 in which case, a reference to the "venue" cannot be treated as the "seat" of the arbitration. 12.2 Micromax Inc.'s insistence on payment in India by altering the original terms is a non-contest/in terrorem clause or a condition precedent which again substantiates the Party's autonomy lest the respondents would have terminated the subsisting distribution agreement for violating the supplementary agreement by giving written notice under clause 15. Equally, clause 16.7 (Effect of terminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vikas" (Page 54 of the Paper book) Final submission- Mere expression of venue of arbitration will not entail that the parties intended it to be the seat. The intention of the parties- keeping intact Party autonomy - has to be determined from other clauses of the Agreement and the conduct of the parties." ii. Submissions on behalf of the Respondent. 19. Mr. Mudit Sharma the learned counsel appearing for the petitioner in his written submissions has stated thus: - "WRITTEN SUBMISSIONS ON BEHALF OF THE RESPONDENTS "M/S MICROMAX FZE (UAE)" I. PETITION NOT MAINTAINABLE AND THIS HON'BLE COURT LACKS JURISDICTION: 1. It is humbly submitted that this Hon'ble Court does not have the jurisdiction to either entertain the Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 ("the Act") and / or appoint an Arbitrator in terms of the Arbitration Agreement between the Petitioner and the Respondent i.e. M/s. Micromax Informatics FZE(UAE) for neither the arbitration seat is India nor the parties ever envisaged the redressal of disputes through arbitration in terms of Indian laws and in India as per the Distributor Agreement dated 09.11.2010 between the Parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 62 and 67 at are Page 242). 10. It is further submitted that the use of "non-exclusive jurisdiction of Dubai Courts" in Distributor Agreement did not ever envisage jurisdiction of Courts outside UAE and in no manner whatsoever the "Courts of India". The word "non- exclusive: has been used in the context that jurisdiction of other Courts in UAE may not be restricted. 11. Invoking of the provisions under section 11 of the Act; would tantamount to re-writing the terms of the Distributor Agreement and taking away parties' autonomy which is the sole principle on which arbitration is based. As such; this Hon'ble Court cannot exercise its powers of appointment of Arbitrator to the present alleged dispute between the Parties. 12. Given that the Governing law and jurisdiction is of Courts in UAE and Arbitration is stipulated to be under UAE Arbitration and Conciliation rules ; this Hon'ble Court has no jurisdiction to either entertain the present Petition and apply any provisions of the Arbitration Act or any other Indian law. II. NO PRIVITY OF CONTRACT BETWEEN PETITIONER AND MICROMAX INFORMATICS LTD. (INDIA): 13. Admittedly the Distributor Agreement dated 09.11.2010 containi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the history of the law of arbitration in India. Prior to the 1996 Act, three Acts governed the law of Arbitration in India - the Arbitration (Protocol and Convention) Act, 1937, which gave effect to the Geneva Convention, the Arbitration Act, 1940 (for short, the "Act, 1940"), which dealt with domestic awards, and the Foreign Awards (Recognition and Enforcement) Act, 1961 (for short, the "Act, 1961") which gave effect to the New York Convention of 1958 and which dealt with challenges to awards made which were foreign awards. Thereafter, in order to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules, the Act, 1996 was enacted. 22. The Act, 1996 is divided into four parts. Part I which is headed "Arbitration"; Part II which is headed "Enforcement of Certain Foreign Awards"; Part III which is headed "Conciliation" and Part IV being "Supplementary Provisions". 23. There was no concept of "juridical seat" or "situs of arbitration" under the Act, 1940, rather the jurisdiction of courts was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tweak that instead of any civil court of the lowest grade competent to entertain the subject-matter, now only the principal civil court or the High Court of original jurisdiction which is competent to entertain the subject- matter shall have jurisdiction. Due to this, the concept of juridical seat of the arbitral proceedings and its interrelationship with the jurisdiction of courts in respect of arbitral proceedings the Doctrine of Concurrent Jurisdiction emerged in the Indian Arbitration Regime. i. The Notional Doctrine of Concurrent Jurisdiction and Applicability of Part I of the Arbitration & Conciliation Act, 1996. 27. It can thus be seen from the discussion in the preceding paragraphs of this judgment that the scheme of the Act, 1996 is bifurcated into distinct parts being Part I, II, III & IV. Each of these parts delineates a unique scheme that deals with different aspects of arbitration or conciliation as the case may be. Section 11 of the Act, 1996 which inter-alia empowers this Court to appoint an arbitrator in case of an international commercial arbitration is contained in Part I of the said Act. Section 2(2) in Part I of the Act, 1996 expressly provides that this pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Arbitration Act, 1940 (No. X of 1940) to set aside an interim award made at London by a tribunal constituted by the International Court of Arbitration of the International Chamber of Commerce (the "ICC Court") in terms of the contract made at New Delhi between the NTPC and the respondent - the Singer Company (the 'singer') for the supply of equipment, erection and commissioning of certain works in India. The High Court held that the award was not governed by the Arbitration Act, 1940; the arbitration agreement on which the award was made was not governed by the law of India; the award fell within the ambit of the Foreign Awards (Recognition and Enforcement) Act, 1961 (Act 45 of 1961) (the 'Foreign Awards Act'); London being the seat of arbitration, English courts alone had jurisdiction to set aside the award; and, the Delhi High Court had no jurisdiction to entertain the application filed under the Arbitration Act, 1940. xxx 47. The decisions relied on by counsel for the Singer do not support his contention that the mere fact of London being the place of arbitration excluded the operation of the Arbitration Act, 1940 and the jurisdiction of the courts in India. In Whitw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits in regard to which we express no views whatsoever. The appeal is allowed in the above terms. We do not, however, make any order as to costs." (Emphasis supplied) (ii) Secondly, the Court held that where the parties have agreed to two distinct choices of law, one governing the arbitration agreement and the other governing the arbitration proceedings i.e., both lex arbitri and lex curiae, then the appropriate courts under both the laws will have concurrent jurisdiction in respect of the matters governed by their respective system of law. Thus, where the parties have agreed that the arbitration agreement would be governed by the Indian Laws whereas the arbitration proceedings would be conducted in accordance with the English Laws, then in such cases two different courts will have concurrent jurisdiction in respect of matters as agreed upon by the parties i.e., the competent English Courts will have jurisdiction in respect of procedural matters concerning the conduct of arbitration while the competent courts in India will have jurisdiction over all matters pertaining to and arising out of the arbitration agreement. The relevant observations read as under: - "26. Whereas, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd edn.; Allen Redfern and Martin Hunter, Law & Practice of International Commercial Arbitration, 1986; Russel on Arbitration, 20th edn. (1982); Cheshire & North's Private International Law, 11th edn. (1987).]" (Emphasis supplied) 30. Thus, this Court for the first time in NTPC (supra) laid down the Doctrine of Concurrent jurisdiction in arbitration albeit in a limited sense inasmuch as the exercise of concurrent jurisdiction by two different but competent courts was limited only to matters of procedure and conduct of arbitration, and that the exercise of jurisdiction by courts at the seat or situs of arbitration over the arbitration agreement and its ancillaries was still regarded to be an exclusive jurisdiction. 31. The applicability of the Act, 1940 was again looked into by this Court in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. & Ors. reported in (1998) 1 SCC 305. The said decision is in three-parts: - (i) First, it was held that as per Section 47 of the Act, 1940 the provisions of the said Act applies to all arbitrations and to all proceedings thereunder, and as such where the agreement to arbitrate is governed by the laws of India, then the said Act would be applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the enforcement or setting aside of an award pursuant to such agreement. It further observed that the court administering the curial law will only have the jurisdiction to administer the conduct of such arbitration or reference. As soon as the arbitration concludes the curial law ceases and with it the jurisdiction of the courts to administer it ceases as well. The relevant observations read as under: - "11. The conclusion that we reach is that the curial law operates during the continuance of the proceedings before the arbitrator to govern the procedure and conduct thereof. The courts administering the curial law have the authority to entertain applications by parties to arbitrations being conducted within their jurisdiction for the purpose of ensuring that the procedure that is adopted in the proceedings before the arbitrator conforms to the requirements of the curial law and for reliefs incidental thereto. Such authority of the courts administering the curial law ceases when the proceedings before the arbitrator are concluded." (Emphasis supplied) (iii) Lastly, this court added that, when it comes to the courts administering the law governing the arbitration agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that unless the arbitration agreement states to the contrary, even if the seat or place of arbitration is outside India, the national courts in India will have concurrent jurisdiction in terms of Section 2(1)(e) along with the courts situated in the seat jurisdiction in terms of the arbitration agreement. The aforesaid decision is in two-parts: - (i) First, it held that although Section 2 sub-section (2) of the Act, 1996 says that Part I will apply where the place of arbitration is in India, yet the Act more particularly Section 2(1)(f) makes no distinction between international commercial arbitrations held in India or outside India, thus the courts in India will have jurisdiction in terms of Section 2(1)(e) even in respect of international commercial arbitrations. The relevant observations read as under: - "14. At first blush the arguments of Mr Sen appear very attractive. Undoubtedly sub-section (2) of Section 2 states that Part I is to apply where the place of arbitration is in India. [...] xxx 16. A reading of the provisions shows that the said Act applies to arbitrations which are held in India between Indian nationals and to international commercial arbitrations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... look at sub-sections (2), (3), (4) and (5) of Section 2. Sub-section (2) of Section 2 provides that Part I would apply where the place of arbitration is in India. To be immediately noted, that it is not providing that Part I shall not apply where the place of arbitration is not in India. It is also not providing that Part I will "only" apply where the place of arbitration is in India (emphasis supplied). Thus the legislature has not provided that Part I is not to apply to arbitrations which take place outside India. The use of the language is significant and important. The legislature is emphasising that the provisions of Part I would apply to arbitrations which take place in India, but not providing that the provisions of Part I will not apply to arbitrations which take place out of India. The wording of sub- section (2) of Section 2 suggests that the intention of the legislature was to make provisions of Part I compulsorily applicable to an arbitration, including an international commercial arbitration, which takes place in India. Parties cannot, by agreement, override or exclude the non-derogable provisions of Part I in such arbitrations. By omitting to provide that Part I will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules chosen by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. xxx 35. Lastly, it must be stated that the said Act does not appear to be a well-drafted legislation. Therefore the High Courts of Orissa, Bombay, Madras, Delhi and Calcutta cannot be faulted for interpreting it in the manner indicated above. However, in our view a proper and conjoint reading of all the provisions indicates that Part I is to apply also to international commercial arbitrations which take place out of India, unless the parties by agreement, express or implied, exclude it or any of its provisions. Such an interpretation does not lead to any conflict between any of the provisions of the said Act. On this interpretation there are no lacunae in the said Act. This interpretation also does not leave a party remed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ything contained in Part I'. Such a non obstante clause had to be put in because the provisions of Part I apply to Part II." xxx 31. On close scrutiny of the materials and the dictum laid down in the three-Judge Bench decision in Bhatia International20 we agree with the contention of Mr K.K. Venugopal and hold that paras 32 and 35 of Bhatia International1 make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto. We further hold that where such arbitration is held in India, the provisions of Part I would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part I. It is also clear that even in the case of international commercial arbitrations held out of India provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the Act and there is no lacuna as such. The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia Internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that Part I of the Act would apply where the place of arbitration is in India, it did not provide that Part I would not apply where the place of arbitration is not in India. It was also held that it was nowhere provided that Part I of the aforesaid Act would not apply to arbitrations taking place outside India. ... xxx 26. Referring to the decision in NTPC case [(1992) 3 SCC 551] which had also been referred to by Mr Gupta, Mr Tripathi submitted that in the said decision the views of jurists such as Dicey, Mustill and Boyd and Russell had been reiterated in support of the contention that the overriding principle is that the courts of the country, whose substantive laws govern the arbitration agreement, are competent courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to the matter of procedure. Mr Tripathi submitted that the decision in the aforesaid case supports the proposition that when the parties to the contract, do not express any choice with regard to the law governing the contract or the arbitration agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case." (Emphasis supplied) b. Post BALCO Regime. 36. The correctness of the decision in Bhatia International (supra) came under cloud, and the same was ultimately referred to a larger bench, which then culminated into the landmark decision of a 5-Judge Constitution Bench of this Court in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc reported in (2012) 9 SCC 552. 37. This Court in BALCO (supra) after a thorough examination of the scheme of the Act, 1996 held that the conclusions reached by this Court in Bhatia International (supra) are neither supported by the text nor the context of the provisions of Section 1(2) and the proviso thereto or Section 2(2) of the said Act. It held that the applicability of Part I of the Act, 1996 is limited only to arbitrations that take place in India. The said decision is in two-parts: - (i) First, it held that a plain reading of Section 2(2) makes it clear that Part I of the Act, 1996 is limited in its application to arbitrations which take place in India. It observed that although the UNCITRAL Model Law which was the basis for the Act, 1996 has not been boldly adopted, yet it does not mean that the territorial principle e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Therefore, the Arbitration Act, 1996 consolidates the law on domestic arbitrations by incorporating the provisions to expressly deal with the domestic as well as international commercial arbitration by taking into account the 1985 Uncitral Model Laws. It is not confined to the New York Convention, which is concerned only with enforcement of certain foreign awards. It is also necessary to appreciate that the Arbitration Act, 1996 seeks to remove the anomalies that existed in the Arbitration Act, 1940 by introducing provisions based on the Uncitral Model Laws, which deals with international commercial arbitrations and also extends it to commercial domestic arbitrations. Uncitral Model Law has unequivocally accepted the territorial principle. Similarly, the Arbitration Act, 1996 has also adopted the territorial principle, thereby limiting the applicability of Part I to arbitrations, which take place in India. xxx 77. We are of the opinion that the omission of the word "only" in Section 2(2) of the Arbitration Act, 1996 does not detract from the territorial scope of its application as embodied in Article 1(2) of the Model Law. The article merely states that the arbitration law as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is outside India, only those courts situated where the 'subject-matter of arbitration' lies i.e., at the place of arbitration will be competent to exercise supervisory jurisdiction over arbitration in terms of Section 2(1)(e) of the Act, 1996. The relevant observations read as under: - "95. The learned counsel for the appellants have submitted that Section 2(1)(e), Section 20 and Section 28 read with Section 45 and Section 48(1)(e) make it clear that Part I is not limited only to arbitrations which take place in India. That these provisions indicate that the Arbitration Act, 1996 is subject-matter centric and not exclusively seat-centric. That therefore, "seat" is not the "centre of gravity" so far as the Arbitration Act, 1996 is concerned. We are of the considered opinion that the aforesaid provisions have to be interpreted by keeping the principle of territoriality at the forefront. We have earlier observed that Section 2(2) does not make Part I applicable to arbitrations seated or held outside India. In view of the expression used in Section 2(2), the maxim expressum facit cessare tacitum, would not permit by interpretation to hold that Part I would also apply to arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake place in Delhi. In such circumstances, both the courts would have jurisdiction i.e. the court within whose jurisdiction the subject-matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located. 97. The definition of Section 2(1)(e) includes "subject- matter of the arbitration" to give jurisdiction to the courts where the arbitration takes place, which otherwise would not exist. On the other hand, Section 47 which is in Part II of the Arbitration Act, 1996 dealing with enforcement of certain foreign awards has defined the term "court" as a court having jurisdiction over the subject-matter of the award. This has a clear reference to a court within whose jurisdiction the asset/person is located, against which/whom the enforcement of the international arbitral award is sought. The provisions contained in Section 2(1)(e) being purely jurisdictional in nature can have no relevance to the question whether Part I applies to arbitrations which take place outside India. xxx Only if the agreement of the parties is construed to provide for the "seat"/"place" of arbitration being in India - would Part I of the Arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996. 195. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International and Venture Global Engg. In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign-seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simpliciter would be maintainable in India, on the basis of an international commercial arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct which, as stated herein above, excluded the Foreign Awards Act from applying to any award made on arbitration agreements governed by the law of India. 14. This being the case, the theory of concurrent jurisdiction was expressly given a go-by with the dropping of Section 9(b) of the Foreign Awards Act, while enacting Part II of the Arbitration Act, 1996, which repealed all the three earlier laws and put the law of arbitration into one statute, albeit in four different parts. 15. However, this Court in Bhatia International v. Bulk Trading S.A., resurrected this doctrine of concurrent jurisdiction by holding, in para 32, that even where arbitrations are held outside India, unless the parties agree to exclude the application of Part I of the Arbitration Act, 1996, either expressly or by necessary implication, the courts in India will exercise concurrent jurisdiction with the court in the country in which the foreign award was made. Bhatia International was in the context of a Section 9 application made under Part I of the 1996 Act by the respondent in that case for interim orders to safeguard the assets of the Indian company in case a foreign award was to be executed in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich stipulate or can be read to stipulate that the law governing the arbitration agreement is Indian law which would continue to be governed by the Bhatia rule." (Emphasis supplied) 39. Thus, the legal position that emerges from a conspectus of all the decisions referred to above is that Part I of the Act and the provisions thereunder only applies where the arbitration takes place in India i.e., where either (I) the seat of arbitration is in India OR (II) the law governing the arbitration agreement is Indian law. As a natural corollary to the above, the position of law may be summarized as under: - (i) Arbitration agreements executed after 06.09.2012 where the seat of arbitration is outside India, Part I of the Act, 1996 and the provisions thereunder will not be applicable and would fall beyond the jurisdiction of Indian courts by virtue of the decision of this Court in BALCO (supra). (ii) Even those arbitration agreements that have been executed prior to 06.09.2012 and thus, governed by Bhatia International (supra), Part I of the Act, 1996 may not necessarily be applicable, if its application has been excluded by the parties in the arbitration agreement either explicitly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst applied by this Court in its decision in NTPC (supra). In the aforesaid case, the main substantive contract therein had been executed in India, the general terms and conditions appended to the main contract stipulated that the said contract shall be construed and governed according to Indian laws. It further stipulated that the courts of Delhi were conferred exclusive jurisdiction in all matters arising under the said contract. It also contained an arbitration clause which inter-alia stipulated that where the dispute concerns a foreign contractor, then it will be resolved through arbitration and that the rules of conciliation and arbitration of the International Chamber of Commerce shall apply to such arbitrations. Pursuant to the above, arbitration was conducted between the parties therein by a tribunal constituted by the International Chamber of Commerce and an interim award was made at London. The appellant therein approached the Delhi High Court for setting aside the said interim award, however the High Court held that the award was not governed by the Act, 1940 and could only be set-aside at London being the designated seat of arbitration. Aggrieved by it, the appellant th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The parties have the freedom to choose the law governing an international commercial arbitration agreement. They may choose the substantive law governing the arbitration agreement as well as the procedural law governing the conduct of the arbitration. Such choice is exercised either expressly or by implication. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as the law of the country in which the arbitration is agreed to be held. On the other hand, where the proper law of the contract is expressly chosen by the parties, as in the present case, such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract." (Emphasis supplied) (ii) Secondly, if there is no express statement about the governing law, then the true intention of parties as to the place or seat of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not be sufficient to draw an inference as to the intention of parties to regard the chosen place as the proper law of arbitration unless it is supported by the law governing the contract or in its absence if there is a significant link with such place that gives a strong indication that the law governing the arbitration agreement is the law of the place chosen for arbitration. The relevant observations read as under: - "15. In the absence of an express statement about the governing law, the inferred intention of the parties determines that law. The true intention of the parties, in the absence of an express selection, has to be discovered by applying "sound ideas of business, convenience and sense to the language of the contract itself". In such a case, selection of courts of a particular country as having jurisdiction in matters arising under the contract is usually, but not invariably, an indication of the intention of the parties that the system of law followed by those courts is the proper law by which they intend their contract to be governed. However, the mere selection of a particular place for submission to the jurisdiction of the courts or for the conduct of arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of procedure, will govern the conduct of the arbitration, except insofar as they conflict with the mandatory requirements of the proper law of arbitration, or of the procedural law of the seat of arbitration. 27. The proper law of the contract in the present case being expressly stipulated to be the laws in force in India and the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract having been specifically accepted, and the parties not having chosen expressly or by implication a law different from the Indian law in regard to the agreement contained in the arbitration clause, the proper law governing the arbitration agreement is indeed the law in force in India, and the competent courts of this country must necessarily have jurisdiction over all matters concerning arbitration. Neither the rules of procedure for the conduct of arbitration contractually chosen by the parties (the ICC Rules) nor the mandatory requirements of the procedure followed in the courts of the country in which the arbitration is held can in any manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts. xxx 50. The arbitration cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICC Rules are insufficient or repugnant to the public policy or other mandatory provisions of the laws in force in England. Nevertheless, the jurisdiction exercisable by the English courts and the applicability of the laws of that country in procedural matters must be viewed as concurrent and consistent with the jurisdiction of the competent Indian courts and the operation of Indian laws in all matters concerning arbitration insofar as the main contract as well as that which is contained in the arbitration clause are governed by the laws of India." (Emphasis supplied) 46. What has been conveyed in so many words by this Court in NTPC (supra) is that the law which governs the contract including the arbitration agreement, the courts of that system of law will have the supervisory jurisdiction over the arbitration. Where however the parties have expressly chosen a place of arbitration or selected a court of particular country for submission to the jurisdiction or selected the law for conduct of arbitration i.e., curial law, such place will only be regarded as venue, unless such factor is supported by relevant connecting factor sufficient to draw an inference as to what the parties w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is in India". In Balco, it has been categorically held that Part I of the Indian Arbitration Act, 1996, will have no application, if the seat of arbitration is not in India. In the present case, London is mentioned only as a "venue" of arbitration which, in our opinion, in the facts of this case cannot be read as the "seat" of arbitration. 99. We are fortified in taking the aforesaid view since all the three laws applicable in arbitration proceedings are Indian laws. The law governing the contract, the law governing the arbitration agreement and the law of arbitration/curial law are all stated to be Indian. In such circumstances, the observation in Naviera Amazonica Peruana S.A. would become fully applicable. In that case, the Court of Appeal in England considered the agreement which contained a clause providing for the jurisdiction of the courts in Lima, Peru in the event of judicial dispute; and at the same time contained a clause providing that the arbitration would be governed by the English law and the procedural law of arbitration shall be the English law. The Court of Appeal summarised the state of the jurisprudence on this topic. [...] xxx 116. The submission made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involves identifying the law with which the agreement to arbitrate has its closest and most real connection. Where the parties have expressly or impliedly provided the law governing the substantive contract, the arbitration agreement and the curial law, the law with which the agreement to arbitrate has its closest and most real connection would be the law of the seat of arbitration. Where the question before the courts involves ascertaining whether a particular place is the seat or venue of arbitration, the place with the closest connection with the law governing the arbitration agreement would be the seat of arbitration. Interestingly, although this Court deliberately did not address whether seat is to be determined based on the closest connection with the law governing the arbitration agreement or the curial law since in the facts of the said case both the law governing the contract and the curial law were the same, yet this Court approvingly referred to two other decisions in Roger Shashoua (1) v. Sharma, [2009] EWHC 957 (Comm) and Sulame´rica Cia Nacional de Seguros SA v. Enesa Engelharia SA, (2013) 1 WLR 102 (CA) wherein the seat of arbitration was construed on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se actually makes a reference to the "seat" of the arbitration." (Emphasis supplied) 49. Thus, with the decision of Enercon (supra), the stage is now set to examine the decision of Roger Shashoua (1) (supra) to trace the evolution of the Shashoua Principle. b. The Shashoua Principle - 'Venue' to be construed as 'Seat' 50. In Roger Shashoua (1) a Queen's Bench Division (Commercial Court) of the England & Wales High Court held that when there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion would be that such venue in-fact is the juridical seat. It observed that often in arbitration agreements it is much more likely that the law of the arbitration agreement will coincide with the curial law, and thus any express stipulation of the curial law would aid in determination of the juridical seat. The relevant observations read as under: - "26. The Shareholders Agreement provided that "the venue of arbitration shall be London, United Kingdom" whilst providing that the arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.5 of the Shareholders Agreement which provides that each party is to bear its own costs of the arbitration, which, on its face, is inconsistent with section 60 of the Arbitration Act. It is said that this conflict, when seen objectively, must militate against the application of English law to the arbitration and to the seat being London. In my judgment none of these matters will bear the weight which the defendant seeks to put upon them. 29. The defendant contends that the law of the agreement to arbitrate is Indian law, essentially because the proper law of the Shareholders Agreement is Indian law. As appears from the decided authorities however, although there have been dicta to this effect, recent decisions, where the focus has been on the seat of the arbitration and the agreement to arbitrate, establish that it is much more likely that the law of the arbitration agreement will coincide with the curial law. This does not therefore much assist the defendant and the argument that the nature of the Shareholders Agreement points to Indian law as the curial law is in reality no more than an argument that its nature points to Indian law as the substantive law of the Shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rable conclusion is that London is the juridical seat and English law the curial law. xxx 54. We had earlier extracted extensively from the said judgment, as we find, the Court after adverting to various aspects, has categorically held that the High Court had not followed the Shashoua principle. The various decisions referred to in Enercon (India) Ltd., the analysis made and the propositions deduced leads to an indubitable conclusion that Shashoua principle has been accepted by Enercon (India) Ltd. It is also to be noted that in Balco, the Constitution Bench has not merely reproduced few paragraphs from Shashoua but has also referred to other decisions on which Shashoua has placed reliance upon. As we notice, there is analysis of earlier judgments, though it does not specifically state that "propositions laid down in Shashoua are accepted". On a clear reading, the ratio of the decision in Balco, in the ultimate eventuate, reflects that the Shashoua principle has been accepted and the two-Judge Bench in Enercon (India) Ltd., after succinctly analysing it, has stated that the said principles have been accepted by the Constitution Bench. Therefore, we are unable to accept the subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nior Counsel is unacceptable. xxx 74. It is apposite to note that the said decision has been discussed at length in Union of India v. Reliance Industries Ltd. The Court, in fact, reproduced the arbitration clause in Singer Co. and referred to the analysis made in the judgment and noted that notwithstanding the award, it was a foreign award, since the substantive law of the contract was Indian law and the arbitration law was part of the contract, the arbitration clause would be governed by Indian law and not by the Rules of International Chamber of Commerce. On that basis the Court held in Singer Co. that the mere fact that the venue chosen by the ICC Court or conduct of the arbitration proceeding was London, does not exclude the operation of the Act which dealt with the domestic awards under the 1940 Act. and thereafter opined: "13. It can be seen that this Court in Singer case9 did not give effect to the difference between the substantive law of the contract and the law that governed the arbitration. Therefore, since a construction of Section 9(b) of the Foreign Awards Act led to the aforesaid situation and led to the doctrine of concurrent jurisdiction, the 1996 Act, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of arbitration in an arbitration clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings "shall be held" at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a "venue" and not the "seat" of the arbitral proceedings, would then conclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be determined from other clauses in the agreement and the conduct of the parties. 21. In the present case, the arbitration agreement entered into between the parties provides Hong Kong as the place of arbitration. The agreement between the parties choosing "Hong Kong" as the place of arbitration by itself will not lead to the conclusion that the parties have chosen Hong Kong as the seat of arbitration. The words, "the place of arbitration" shall be "Hong Kong", have to be read along with Clause 17.2. Clause 17.2 provides that "... any dispute, controversy, difference arising out of or relating to MoU shall be referred to and finally resolved by arbitration administered in Hong Kong....". On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as "place of arbitration" is not a simple reference as the "venue" for the arbitral proceedings; but a reference to Hong Kong is for final resolution by arbitration administered in Hong Kong. The agreement between the parties that the dispute "shall be referred to and finally resolved by arbitration administered in Hong Kong" clearly suggests that the parties have agreed that the arbitration be seated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eat of arbitration in the underlying Distributorship Agreement is Dubai, UAE and not India. 58. It has been contended by the petitioner herein that, no one fixed place or seat of arbitration has been designated under the Distributorship Agreement since Clause 27 of the aforesaid Agreement stipulates that it shall be subject to the non-exclusive jurisdiction of the Dubai Courts. It has been submitted that since the parties had agreed not to confer exclusive jurisdiction to courts in Dubai, neither of the parties to the agreement construed the arbitration clause as designating courts in Dubai as the seat of arbitration. It was also contended that the non-exclusive jurisdiction clause had been specifically incorporated to confer jurisdiction on other courts too. 59. In Enercon (supra), this Court held that the 'seat' or the situs of arbitration is a crucial location as it determines the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. The relevant observations read as under: - "97. This now clears the decks for the crucial question i.e. is the "seat" of arbitration in London or in India. This is necessarily so as the location of the seat will de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of the jurisdiction conferred by such clause. This Court observed that this is because, the moment a jurisdiction is conferred, the maxim expressio unius est exclusio alterius i.e., expression of one is the exclusion of another comes into play, and it would be as if its an exclusive clause if there is nothing to indicate the contrary. The relevant observations read as under: - "31. In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What appellant says is that part of cause of action has also arisen in Jaipur and, therefore, the Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11. Having regard to Section 11(12)(b) and Section 2(e) of the 1996 Act read with Section 20(c) of the Code, there remains no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court has jurisdiction in the matter. The question is, whether parties by virtue of Clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of Clause 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exclude the jurisdiction of courts other than those mentioned in the clause concerned. Conversely, if the parties had intended that all courts where the cause of action or a part thereof had arisen would continue to have jurisdiction over the dispute, the exclusion clause would not have found a place in the agreement between the parties." (Emphasis supplied) 62. As discussed in the foregoing paragraphs, since the Distributorship Agreement already designates Dubai, UAE as the seat of arbitration, the same would be akin to an exclusive jurisdiction clause with only the courts in Dubai, UAE having the jurisdiction over such arbitration in view of the decision of this Court in Indus Mobile Distribution (supra). 63. Even if it is assumed that the aforesaid clause does not confer jurisdiction exclusively to the courts where the seat of arbitration is situated, still this Court will not have jurisdiction to entertain the present Section 11 petition. This is because, in view of the law laid down in BALCO (supra) and Reliance Industries (supra), Part I of this Act, 1996 will not be applicable where the seat of arbitration is outside India or where the law governing the arbitration ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the doctrine of forum non conveniens. The term 'forum non conveniens' is a latin term which means "an inconvenient forum" and provides that a court which otherwise might have jurisdiction may decline jurisdiction over a case if there is a more appropriate forum available to the parties, and is typically invoked in respect of cross-border subject-matters that are amenable to multiple concurrent jurisdictions. Depending upon the nature of the dispute, the subject-matter involves and the parties thereto, the courts by invoking this doctrine proceed to determine which one of the available forums may be more convenient and fair for entertaining and adjudicating the matter. 66. In order to apply the doctrine of forum non conveniens an dequate alternative forum must exist where the subject-matter may be espoused. The alternative forum must be capable of providing a fair and adequate remedy for the dispute, however this does not mean that the alternative forum must offer identical remedies, and this doctrine may be applied as long as the other alternative forum offers a reasonably fair process of remedy and is more convenient or appropriate in the opinion of the court invoking the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... native forum. In determining whether there is another forum which is more appropriate for the trial of the action, the court will look for the forum with which the action has the most real and substantial connection." (Emphasis supplied) 68. In Modi Entertainment Network v. W.S.G. Cricket Pte. Ltd. reported in (2003) 4 SCC 341, this Court observed that while construing a non- exclusive jurisdiction clause, where more forums than one are available, the court in exercise of its discretion will examine as to which is the appropriate forum (forum conveniens) having regard to the convenience of the parties. It further observed that Where parties have agreed, under a non- exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily should not be entertained as s it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. It also held that the burden of establishing that the forum of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vis major or force majeure and the like. (5) Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. (6) A party to the contract containing jurisdiction clause cannot normally be prevented from approaching the court of choice of the parties as it would amount to aiding breach of the contract; yet when one of the parties to the jurisdiction clause approaches the court of choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se be treated as vexatious or oppressive nor can the court be said to be forum non- conveniens. (7) The burden of establishing that the forum of choice is a forum non-conveniens or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements that have been executed prior to 06.09.2012 Part I of the Act, 1996 will not be applicable, if its application has been excluded by the parties in the arbitration agreement either explicitly by designating the seat of arbitration outside India or implicitly by choosing the law governing the agreement to be any other law other than Indian law. (iv) The moment 'seat' is determined, it would be akin to an exclusive jurisdiction clause whereby only the jurisdictional courts of that seat alone will have the jurisdiction to regulate the arbitral proceedings. The notional doctrine of concurrent jurisdiction has been expressly rejected and overruled by this Court in its subsequent decisions. (v) The 'Closest Connection Test' for determining the seat of arbitration by identifying the law with which the agreement to arbitrate has its closest and most real connection is no longer a viable criterion for determination of the seat or situs of arbitration in view of the Shashoua Principle. The seat of arbitration cannot be determined by formulaic and unpredictable application of choice of law rules based on abstract connecting factors to the underlying contract. Even if the law gov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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